TMPG Issues Best Practices for Agency MBS

The Treasury Market Practices Group (TMPG) just issued new best practice recommendations for trading and settlement in the Treasury, agency debt, and agency MBS markets.

In its introduction to the best practices paper, TMPG said that it recognizes the importance of maintaining the integrity and efficiency of these over-the-counter markets.

"We believe that the public and all market participants benefit from a marketplace that is transparent and efficient," the group said. These characteristics, TMPG said, help maintain "vigorous competition and liquidity" to these sectors. Thus this shows the importance of incorporating best practices in market participants' operations to promote trading integrity and an efficient marketplace.

The best practices are meant not only for dealers, but also for market players active in these wholesale markets, including brokers, buy-side firms, investors, and custodians, the group said.

The TMPG members believe that these best practices if adopted can strengthen each market participant’s existing controls. Additionally, TMPG said that the implementation of these best practices will help limit market disruptions such as episodes of protracted settlement failure. They will also buttress overall market integrity.

Specific information about recommendations for minimizing widespread and persistentsettlement fails in the Treasury market can be found on the group's Web site.

The group said that as market players utilizes these recommendations, they should consider their unique characteristics. These considerations include asset size, transaction volume, and the form of the organization’s participation in the market — for instance, market maker,investor, or custodian.

This compilation is not a comprehensive guide to doing business in these markets, TMPG said. Instead, they are for both new and established market players in these sectors to serve as a benchmark when reviewing the adequacy of operating procedures.

Securities Industry and Financial Markets Association (SIFMA) President and CEO Tim Ryan commented on the issuance of TMPG's new best practice recommendations.

"By encompassing the Treasury, agency debt and agency mortgage-backed securities markets, the TMPG’s best practices for trading and settlement now promote well-functioning, liquid markets across the majority of fixed-income securities," Ryan said. "SIFMA shares this focus on ensuring disciplined, orderly markets that promote liquidity, and the best practices issued today complement SIFMA’s existing market standards and practices in these markets. We look forward to continuing to coordinate with the TMPG on these important issues in the future.”

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